Adding fire of technology to gasoline trade

Anticipated entry of MNCs to herald quantum leap in gas stations’ offerings

Insiders of China’s fuel retail industry are an excited lot these days, and they use an analogy to describe what they see as the coming epochal change.

Imagine, they said, an old banger morphing into a glamorous, irresistible, state-of-theart mean machine, and it would help you to visualize plain-Jane filling stations transforming into shiny, gleaming modern metal-andglass structures.

They would offer not just eye-pleasing design and architecture but an array of enhanced products and valueadded services — stuff that could potentially alter lifestyles, transform the industry and support economic growth.

China’s 100,000-station gasolene retail sector is set to transition to the digital age on the back of deepening reform and opening-up, industry insiders said.

Conceivably, cars will run on better-grade, additive-enriched, mileage-boosting, if pricier, gasolene. Instead of a dreary ambience and uninspiring staff, filling stations will sport bright looks and might unleash shapely and energetic vehicle cleaners with foam sprayers and sponge mops the moment motorists roll into their premises.

What’s more, there will be convenience stores, fast-food kiosks, shopping arcades, even mini cinemas. Oh, there will be fuel too. And the time and distance between any two fuel outlets could shrink substantially as they mushroom all over.

Details are still hush-hush, but what insiders see coming are entry of multinationals, mega investments and stiffer competition. As a larger number of players vie for the same pie, consumers may benefit in terms of services getting cheaper and better. All this will likely compel State-owned oil behemoths to shape up or ship out.

Global energy giants Royal Dutch Shell plc and BP are expected to invest more in gas stations in China as the government lifted restrictions on foreign investments in the sector on June 28.

The removal of policy barriers is part of the National Development and Reform Commission and the Ministry of Commerce’s new “negative list” that eased restrictions in various sectors including banking, automotive, commodities and agriculture.

Opening up of the fuel retail sector is considered a landmark event in the energy sector. Out of the nearly 100,000 filling stations countrywide, more than half are owned by two State-owned oil giants: China National Petroleum Corp, or PetroChina, the nation’s largest oil and gas producer by annual output, and China Petroleum and Chemical Corp, or Sinopec, the world’s largest refiner.

In contrast, only around 3,100 or 3.1 percent are currently operated by foreign companies, mostly joint ventures with Sinopec or PetroChina. The jointly owned gas stations sell products from their Chinese partners or their joint venture refineries.

Until now, a foreign entity was allowed to own only 30 fuel stations outright. The rest needed to be joint ventures with local partners as the majority shareholders. This rule applied even when foreign players wanted to sell different kinds and brands of oil and gasoline from multiple vendors.

But all that is going to change now as the government has scrapped the related rule. So, foreign players’ share is expected to increase rapidly.

Observers see expected investments spawning purchases of land, erection of modern filling stations and creation of new jobs. Related figures and financial details are yet to emerge, but there is consensus this is going to be big deal.

International oil giants like Shell are more confident of entering China’s oil retail market. They will likely operate more wholly owned stations across the country, said Li Li, energy research director at ICIS China, a provider of analyses and research into China’s energy market.

Li said with the restriction removed, foreign companies will see more options for oil and gas supplies and a higher market share by providing high-end products and valueadded services.

“Foreign operators might still need to rely on local refineries initially and their pricing would depend on the form of their cooperation with companies,” she said.

“The choice of local partners, collaborative model and a reliable source of petroleum local products are also critical to their success in the market.”

Not surprisingly, China has vowed to further lower the total number of restrictions on foreign investment to 48 from 63, especially in the services sector, infrastructure, railway